BlackBerry: Jefferies Sees Q10 Sell-Outs, Evercore Lauds DoD Approval

By Tiernan Ray

Shares of BlackBerry (BBRY) are higher by 22 cents, or 1.4%, at $15.92, after the Street this morning gave a couple of thumbs up to the progress in its BB10 operating system-based handsets, the Z10 and the Q10, the former of which went on sale starting at the end of January and the latter of which just went on sale in some countries last week.

Jefferies & Co.’s Peter Misek reiterates a Buy rating on the shares, and a $22 price target, returning to a theme from earlier in the week, writing that his “checks” of sales of the Q10 in “the greater Toronto area” and in the U.K. this week indicated “broad sell-outs with generally limited stock otherwise”:

Based on our store checks, the BlackBerry Q10 has been selling extremely well and has been sold out or seeing limited availability in Toronto and across the U.K. We conducted checks with Bell, Rogers, and Telus in Canada, and with Carphone Warehouse, Vodafone, and Orange in the U.K.

In contrast to reports earlier in the week of a cut in production of BB10-based devices, Misek writes that he’s seeing production holding up:

Misek also sees the company’s user conference in Orlando, May 14th to 16th, bringing additional details about the company’s BlackBerry Enterprise Server, or BES, which is being positioned more broadly as a system for managing not just BlackBerrys but also Apple‘s (AAPL) iOS devices and mobile devices based on Google‘s (GOOG) Android:

In June, we expect the launch of sandbox capability for iOS and Android, but BBRY may preview this at the conference. We also expect BBRY to showcase a new streamlined implementation of BES10. Currently, BES10 is installed in three server-side components: 1) BlackBerry Device Service (BDS), which supports PlayBooks and BB10 handsets; 2) Universal Device Service (UDS), which provides mobile device management for iOS and Android devices; 3) BlackBerry Enterprise Server (BES) 5.0.3 and above, which supports older BlackBerry handsets. Currently, BES 5+ has to be installed on its own server while BDS and EDS can be on the same virtual server. BBRY plans to launch an upgrade in May 2013 that will combine BDS and UDS into a single component and let it run on the same server as BES 5+. We think the availability of the streamlined BES10 will catalyze enterprises to shift from trials of BES10 to broader roll-outs

And Mark McKechnie of Evercore Partners, who has an Underweight rating on BlackBerry shares, nevertheless today applauds the company having gotten approval for BB10 devices from the U.S. Department of Defense:

We believe this is good news as it preserves the status quo, but point out that Samsung [Electronics (005930KS)] also got approval, which is negative for BBRY as Samsung had not been approved to date and thus offers more competition. We had noted this as an opportunity in our note earlier this week following a presentation by Samsung’s enterprise head, Tim Wagner (formerly of BBRY). Samsung’s stated goal is to break into the US government in a meaningful way in the coming quarters. Recall that Samsung has been making a big push with its SAFE program (“Samsung Android for Enterprise”) and Knox (increased security). Samsung has spent ~ $100M to date in branding for SAFE, and is working aggressively with the ecosystem players including MDM plays AirWatch and Mobile Iron, as well as GENBAND for signaling. The one challenge is the lack of a physical QWERTY keyboard which it does not appear Samsung will make, as it believes the tradeoffs for touch typing vs. hardware are more than offset by a larger screen size. In terms of sizing, web commentary indicates ~ 8M devices for the pentagon vs. 3.2M employees in the DOD. Also, Reuters had run an article saying the contract would be awarded in the April timeframe and start the year with at least 162,500 devices but eventually software for 8M devices.

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There are 24 comments

MAY 3, 2013 12:45 P.M.

freddysrevng wrote:

Looks like AAPL is "odd OS out" at the Dept of Defense... Interestingly, Apples iOS is 6 years old now and has NEVER been able to get certified by the D.O.D. The media acts like this is the first year it has tried to achieve certification.

With BlackBerry and Samsung approved no need for another "Toy Operating System" for the government.

BlackBerry has 470,000 current users in the Department of Defense and other government agencies - Q 10s, Z 10s, R 10s and Aristos (later this year) for all of our government friends.

Sorry Apple.... you services are not required.

Follow Misek... he is the most accurate analyst on what is going on in mobile.

Q 10 ... "Remember the Sellfridge"..

MAY 3, 2013 12:49 P.M.

Mark Steven wrote:

Hey Tiernan,
Why is this stock, having such a hard time going anywhere on great news. Is it the short putting presure on the price.
Thank you

MAY 3, 2013 12:57 P.M.

Anonymous wrote:

DoD is saying 'come on in, Samsung!', at the same time, it is 'sayonara, Blackberry'.

The DoD pageant goes like this:

Second Runner-up is.......RIM (legal name)

First Runner-up is........Samsung.

And the envelope please (21 gun salute....)

The Winner is..........A P P L E !!!!!!!

The nation applauds and rises to its feet.

MAY 3, 2013 1:01 P.M.

Frank wrote:

Can someone show me the official Press release from Samsung ? it's nowhere . at this point only Blackberry as the certification!

MAY 3, 2013 1:07 P.M.

Kurt Windibank wrote:

Looks like Microsoft is odd man out..

Also...the key "win" here will be who wins the MDM contract. BES 10 has the capability to manage multiple platforms and that is what the last few sentences of the article is referring to...not new devices but how many devices will be managed by the MDM solution.

BES 10 meets all of the criteria...so "Anonymous" before Apple takes the stage to "win" the trophy and take a bow....what MDM does Apple offer again?

MAY 3, 2013 1:09 P.M.

freddysrveng wrote:

To all of my many followers: Mark my words, crapple is TOAST!
It only sold 48 millin phones last quarter and not ONE was sold to DoD!

Of the 7 million phones bbry sold last quarter probably most of those were to the DoD since I haven't seen anybody carrying around a bb phone since my third wife left me almost six years ago ( which, coincidentally, is when i first started buying rimm shares).

If crapple can't sell any phones to the DoD then it is DoA!

Enter: BBad timng on my part, having bought rimm shares north of $120/share
Exit: My job at the appliance store where I Sellfridges + ovens, once bbry reaches north of $120/share

MAY 3, 2013 1:11 P.M.

speechisntfree wrote:

@freddyserving..... so what you're actually saying then is..... Apple has been number 1 without any DOD market share..... so then it's not as much of a big deal as you'd like to infer.....

and before you go off with your childish rants..... I own Blackberry and Apple stock..... I'd also own Sansung if they were traded on American exchanges.....

unlike you..... I realize that there is more than enough consumerism in the world for multiple companies to be successful.

MAY 3, 2013 1:13 P.M.

Anyonymous wrote:

Can I have some of whatever you're smoking? It must be gooooood stuff!

Well lets see, Knox services a limited number of android devices.... very limited I am guesstimating (Probably only Samsung products), while BES10 manages a large number (Including both Samsung & Crapple), so which software would be more appealing to DoD???

MAY 3, 2013 1:23 P.M.

anadigics wrote:

Tiernan, Samsung has NOT been approved ! (BTW, Knox is not ready, has been delayed for August)
There is NO official press release from either DoD or Samsung!

The only outlet that correctly reported this was marketwatch, all the rest (including yahoo) are pasting the same story without bothering to check... This is sad.

MAY 3, 2013 1:25 P.M.

@jonnyfishboy wrote:

And speechisntfree, Apple is NOT number one lol. Android aka Samsung is. Though I do agree with the rest of your post.

And a BIG Thank you to my many fans and followers as well :D

MAY 3, 2013 1:29 P.M.

anadigics wrote:

Tiernan, Samsung has NOT been approved ! (BTW, Knox is not ready, has been delayed for August)
There is NO official press release from either DoD or Samsung!

I guess since the title was "Blackberry gets Pentagon nod, but Apple’s still waiting" the copy-paste media assumed Samsung's Knox was through. Nope. You'll hear it LOUDLY when it will happen.

The only outlet that correctly reported this was marketwatch, all the rest (including yahoo) are pasting the same story without bothering to check. This is sad.

MAY 3, 2013 2:07 P.M.

freddysrevng wrote:

@ speechtree.... "No" - what I am saying is that if you listen to the iTard media, over this past week, you would have thought that Apple is, either, "approved or a slam dunk to be approved" by the Department of Defense.

I am going to slow this down for you..... my point is they are making it look like this is the first time that AAPL has gone for this certification with its "oldest, not secure and most boring OS in mobile today" aka iOS - and that is not true.

You see, speech, the Department of Defense is about keeping us safe and are not as persuaded by whining metrosexual Fanboys who cannot survive in their workplace without Instagram. The DOD doesn't really care about "Metrosexual Must Have Apps" which is why there are 470,000 BBRY users in the federal government - where security matters.

I own AAPL and BBRY (more BBRY naturally) - and I don't want my government making security choices, based on, "more people take pictures with iPhone than any other camera".....

Q 10

MAY 3, 2013 3:33 P.M.

Anonymous wrote:

Kurt Windibank,

Apple device logistics deploy the IMEI, the FindMyiPhone app tracks iPhones and iPads using IMEI. Then, iTunes users have a choice, either an independent Apple iTunes UserID, or the independent Apple iCloud UserID, formerly Apple ID or MobileMe UserID. The iTunes UserID is used mostly for music and media downloads, and iTunes can optionally synchronize to the iCloud ID. However, the iCloud UserID is far more powerful because the user can partition all his data and information under one iCloud UserID. All the data, programs, media, documents, are constantly in sync within iCloud in real time. There is no similar ecosystem in the world, not even the long time incumbents like Oracle, IBM, and Microsoft, and certainly not RIM Blackberry. The Pentagon is very hungry for the iCloud ecosystem. DoD can benefit greatly from a private iCloud uniting DoD as if it is a single human body, from head to toe. Apple also sports highly intelligent AI in Siri. The Apple gears are purebred Unix variant, a royal bloodline from BSD 4.4, the guts within Apple is genuine Unix, unlike Android (linux) and BB10 (QNX, one of 7000 RTOS available in the world). Because BB10 is based on the QNX RTOS, all the devices execute in 'slow-realtime' thus the RIM MDM for BB10 device is a separate BDS (Blackberry Device Services) within BES10. In the real world, nearly all system devices are defined in a separate base table with device attributes down to the expiration data and time, but each systems have their own MDM management making the BES10 MDM superfluous. SAP AG, for example, had its own MI (Mobile Infrastructure) but has since abandoned the MI and acquired the Sybase mobile platform instead. The beauty in Android is it has open layers within the Android stack which allows developers to design and implement layers of management that are highly scalable and flexible. Samsung's Knox is a Android layer that will provide utterly powerful and specialized MDM over and above the competitions such as Apple and RIM Blackberry. DoD is not in the technology business, and DoD has no wishes to pay along for most of RIM Blackberry's torrents of patches and updates nor its global messaging data centre in Waterloo. Increasingly DoD will find the Android platform a lot more attractive and usable because of Android's unique and persistent customizability. I see DoD owning exclusively certain branches of DoD Android catered to DoD many unique needs. On the other hand, Apple's real time ecosystem provides the instant integration that is the holy grail of any modern warfare ecosystem. Apple gears and AI ability (Siri) provides DoD unparalleled military intelligence and app capabilities that make the already extremely powerful DoD infrastructure even far more capable, powerful, analytical, and with apps, can take on missions that are far more complex while minimizing risks.

MAY 3, 2013 3:47 P.M.

Anonymous wrote:

Californian companies have a long standing history in defence contracts. Apple of Cupertino is now christened by DoD and will work in close relationship with other defence companies such as Lockheed Martin, Northrop Grumman, and Boeing.

There will be a lot of Apple personnel who are from DoD.

MAY 3, 2013 4:17 P.M.

Anonymous wrote:

While IMEI provides device level security, it is a very poor choice for military trusted grade of security. Biometric fingerprint recognition is a lot more reliable and manageable within a military context. This is why there are rumours of newer iPhone built with a fingerprint scanner (AuthenTics), perhaps these batches are meant for military deployment only. The only bottleneck is the current fingerprint scanning is not highly reliable, therefore requiring user ID and password to fetch the fingerprint prior to scanning and matching. The fingerprint matching algorithm is 30% functional, often missing the key inflections required to properly identify the fingerprint. The security of fingerprint can also be compromised by intercepting and injecting false information to enable approvals. Currently there is only one working solution by a Ottawa (Canada) engineer who has perfected a solution using a set of Random Generated Number which can not be forged, making it fully reliable, this Ottawa firm used to be called Oscan which has been renamed Liska Biometry based in the US, the technology of Liska was flawed and does not work as the diluted management at Liska ousted the original creator of the fingerprint technology prematurely. the original Ottawa creator of Oscan is living in Ottawa (Canada) who has recently developed this working solution. If Apple can partner with this Ottawa creator then the AuthenTec scanner will have a working solution for DoD instead of using AuthenTec's currently flawed fingerprint solution.

MAY 3, 2013 4:28 P.M.

the whole world is conspiring wrote:

against bbry. it's so obvious!

the only reason bbry isn't trading in the hundreds per share is forbes, wsj, yahoo, appl, hedge funds, cnbc, the tea party, american professional hockey teams, budwieser, republicsn congressmen,, single mothers, male prostitites, lgbt groups, gun reform advocates and friends and family of kevin bacon are purposely making a relentless and concerted effort to keep bbry down.

just as soon as the world wakes up and understands bbry ceo thorsten's BRILLIANT vision.: "the future is mobile" the world will see that qnx will run EVERYTHING!

i mean, who thinks that far out and boldly claims that the future is mobiile computing?

bbry, that's who.

simply, awesomely, briiliant. bbry will hit $1000 per share by 2015!!

MAY 3, 2013 5:33 P.M.

James wrote:

Anyone who puts out a cracking mouldy yucky old plastic keyboard - so 1970's - passing off a boring and poorly supported iClone charging more than the global gold standard iPhone should get his IQ and EQ examined by his family doctor. Even worse, sprouting Jim Balsillie like oxymorons like 'tablets will be out in 5 years' certifies Thorsten Heins as yet another idiot.

MAY 4, 2013 4:14 A.M.

@the whole world wrote:

Agree with you wholeheartedly.

Heins is a God to be worshipped. The fact that he gets the mobile thing is waaaaaaaay ahead of the times!
Given that he thinks so ahead of the curve, i wonder if he's thinking the way i'm thinking: drive up flash.

kind of like a fastfood restaurant, mcdonalds if you will. You just order from the lighted billboard: "i'll take 16 gigabytes of flashram" you order.

and then, after you drive up to the second window, voila!

in a white paper bag you get your hermetically sealed ram just like that! plus, if they forget to give you a receipt, then you get your ram free!

heins totally gets it; much to the world's chagrin and total bewilderment,: mobile computing is the next thing.

which i think is funny because NOBODY in the last 10 years ever even thought about mobile being ANYTHING, even remotely

it takes a gillage to raise a venious like thorsten howell the third!

MAY 4, 2013 7:52 A.M.

Gradril Victimaximusecarioriato wrote:

The Vietnamese Malthusian Rebellion has just begun but these people who apply this doctrine in their everyday lives have inner thought processes that could amaze the pain speaking, down to earth Germanic European human. Who would think an economy the size of Sydney, could owe too much debt to Middle Eastern tax agents. Is it trade or just deception, compare oil income to credit card debt in the under mid age consumer. Yes, this includes young girls, college boys and low pay clerks + factory process workers that are overexposed by the rejection of their employer and company as a result to the advance of the "technological Global Economy". In the technology era, some will win and others will lose, either way the price is too big to comprehend for the lower class worker. Discussions of equal taxation, a fair system of taxing the citizens of this country have not bared much fruit in my analysis ... it's a shame we couldn't stop the fall of the non Malthusian economy in Australia. However, the tourism industry is still on it's two legs and profiting but nobody knows for sure except the Treasurer.

MAY 4, 2013 12:00 P.M.

HabsGuy wrote:

Wow! Is this a forum for wing nuts? Scary to think some of you are professionals of some sort, or otherwise occupying some level of influence in our society. My mechanic could speak in a more balanced and reasonable manner than most of you, despite his not spouting random details in an attempt to sound informed.

None of these companies are going away in the next ten years. Blackberry has executed a remarkable turnaround and are still very much a culture of innovation. They may grow share in coming two years and are currently undervalued. Apple has a war chest of cash and patents, as do Samsung, google,Nokia and Blackberry. Each will leverage this IP and we haven't really any way of knowing who will hit pay dirt next by starting the next tech trend.

In terms of MDM, BB is a little ahead of the pack at present and certainly will not be wiped out of this space overnight, wether they get the DoD contract or not. But they likely will get it this time simply because they will be ready for implementation first, and are proven competent in this space. Bureaucracies do not like to take chances nor do they like training people on unfamiliar technologies and softwares. BB has to be the favourite to get the contract.
Lastly, android and Samsung phones were not given clearance by DoD: KNOX was. BB play book, phones, and BBEOs were also.

About Tech Trader Daily

Tech Trader Daily is a blog on technology investing written by Barron’s veteran Tiernan Ray. The blog provides news, analysis and original reporting on events important to investors in software, hardware, the Internet, telecommunications and related fields. Comments and tips can be sent to: techtraderdaily@barrons.com.